Law: Income Tax Act, 1922

Section: 4

Section 5 of the Income-tax Act, 1961 [corresponding to section 4 of the Indian Income-tax Act, 1922] - Income - Accrual of - Assessment year 1955-56 - Whether profits did not arise from day-to-day or from transaction to transaction, and destination of profits must be determined by title thereto on day on which they arose - Held, yes - Whether income becomes taxable on the footing of accrual only after right of taxpayer to income accrues or arises, and in case of an agreement which makes profits receivable at or on happening of a contingency, fact that profits are result of transactions spread over a period which covers a period preceding happening of that contingency would not make receipt liable to be paid to persons other than those who are entitled to receive it on date on which it is actually received or became receivable 'A' was manager of Government HUF - HUF was partner in a firm - HUF disrupted in 12-11-1955 'A' became full owner of share of profit in firm from 1-1-1955 and any liability under partnership deed would thereafter be borne and discharge by 'A' - During amount proceeding for assessment year 1955-56 [previous year being 27-10-1954 to 14-11-1955] contended that share of profits of 'A' which accused on or after 31-12-1955 belonged to 'A' in his individual capacity and was not liable to be included in taxable income of assessee - HUF firm made up its accounts at end of calendar year, assessee had no interest in share of profits for calendar year 1955, which accrued at end of that year to a in his individual capacity - Revenue authorities, however, assessed said amount in hands of assessee - HUF - As per partnership agreement accounts of firm had to be adjusted every year, and accounts for calendar year 1955 were not and could not be adjusted before 31-12-1955 and was entitled to receive share of profits at time when accounts were adjusted - Whether since profits arose on settlement of accounts on 31-12-1955, A alone was owner of those profits and assessee HUF had no right therein though those profits were undoubtedly result of transactions spread over entire period of calendar year 1955 - Held, yes - Whether share of firm income of or any part…

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